GAIL India seeks LNG import swap

GAIL India Ltd., a state owned gas utility, will swap a third of its contracted 5.3 million tpy of US imported LNG for a closer gas exporter, in order to cut down on transportation costs.

According to the GAIL website, most of the imported LNG is from the Sabine Pass liquefaction facility and had been agreed with Cheniere Energy Partners on a free onboard (FOB) basis for 20 years with supply starting in 1Q18. Another supply deal is with Dominion Resources for 2.3 million tpy, also beginning in 2018.

"Transporting LNG in cryogenic ships from the US will not just be time consuming, but will add a little extra to the cost, wiping away some of the gain accruing from a Henry Hub linked price for gas," one unidentified senior company official said.

Now the company wants to swap LNG with firms that have customers in regions such as Africa, the Middle East or Asia Pacific, where US law and sanctions do not prohibit LNG trade. In exchange, GAIL is seeking equivalent supplies on a delivered basis at Indian regasification terminals in western India.

"There are suppliers who sell LNG to Europe from the Middle East or East Africa or the Asia Pacific region. GAIL's US LNG can be supplied to European users and an equivalent volume shipped to India" the official continued.

Organising trade with new partners could save 10 – 15 days for the round trip from India to the US and has been estimated to save US$0.40 – 0.50 per million British thermal units (Btu) by swapping.